Dave Roberts

Families looking for good schools and friendly neighborhoods often look at Rohnert Park and Windsor, the two cities that bracket Santa Rosa on the south and north. Both are reasonably recent towns built during the last half of the last century. Windsor is slightly newer, but Rohnert Park has Sonoma State University and better proximity to Marin and San Francisco.

They have each struggled with the crash of the housing bubble and I wanted to look at the numbers to see the state of the market. I pulled all the sold listings from July through September of 2009 for single family homes selling for less than $300,000.

I was surprised most of all by the vitality of Rohnert Park. The transactions at the entry level of the market continue on a torrid pace of overbidding that makes it hard for first time buyers to compete. At the same time, however, it shows a very healthy interest in home ownership and investment.

What you see in this chart is an average overbid of about $13,000 in Rohnert Park, and an average underbid in Windsor of about -$4,000. Even though Windos starts off with a higher average listing price (in the less than $300,000 price range), the average selling price ends up higher in Rohnert Park. I don't think you can draw a lot of conclusions from this. If I were advising first time buyers on a limited budget where they should be looking at property, I might steer them to Windsor just to avoid getting into as many bidding wars.

What's Real in Real Estate?

REO transactions are real. It's just that for home owners and investors trying to sell their homes, the REO market has been the 800 pound gorilla squashing average sellers. Normal transactions have almost vanished from the market as buyers chase the bank owned home bargains they read about. We've been living with this in most markets for at least 18 months.

I'm happy to announce that in Sonoma County, CA, at least for now, the foreclosure properties that dominated the market for most of 2008 and 2009 are finally becoming a minority of transactions. In fact the new listings in the last thirty days in Sonoma County break out as:

• Normal Market Listings: 345 homes
• Short Sale Listings: 143 homes
• REO Listings: 133 homes

It's a welcome change for the 345 people who were able to list their property for sale in a market where REO listings now have less than 20% market share of new listings. Owners still have to price their homes properly, but they're not competing with the banks' asset managers nearly as often.

The chart shows the trend month by month since the start of 2008. REO reporting was sketchy in our MLS, so I don't think we captured much data for the first few months, but it was clear by July of last year that REO transactions were beginning to outnumber traditional sales. The trend accelerated from there, and by the end of 2008 and beginning of 2009, sales of bank owned properties outnumbered traditional sales by more than 2 to 1. The number of normal owner-to-buyer transactions was fewer than 100 per month in January and February of 2009.

By May of this year the ratio was back to 1 to 1 for REO sales vs. open market transactions. During the summer the trend away from REO domination of the market has continued and we now (early October) are looking at REO sales falling towards the 100 per month level. My headline about the "real" real estate market returning after long domination by REO properties is proven by the numbers.

Of course, all this can change. We have rumors of waves of foreclosed properties coming from Option ARMs and other financial instruments due for reset soon. We hear tales of ghost inventory of REO properties just waiting to be dumped on the market. We all know people who are defaulting month after month on their mortgages without bank action. It's nearly impossible to get a clear understanding of the REO market and why banks are not acting more aggressively. What I can say is that if I were a banker with a lot of potential REO properties on my hands, I would have been putting them on the market starting in late spring when buying interest intensified and the REO inventory was dropping.

Keep watching my reo sites to check for active listings of foreclosed property in Northern California areas you are interested in.

• Sonoma County REO Property
• Marin County REO Property
• Napa County REO Property
• Lake County REO Property
• Mendocino County REO Property
• Vallejo REO Property

I showed a great piece of property today.

I know it's great, but the client and his agent just know it's got a lot of trees on it.

The seller has already done a little bit of clearing on the six acres, but has resisted our urging to do additional opening up of the forest canopy. My broker and I are both fans of filtered views, so we would encourage any buyer to be cautious about removing too many trees, but this land is still in the heavily forested stage, so we aren't worried about taking out too many trees.

Some big bay trees have been removed and some of the smaller redwoods and Douglas fir have been removed. Still, unless you are familiar with how trees can overwhelm a property, you could almost look at this land and wonder if anything had ever been cut. The picture gives a pretty clear representation of what this property looks like to a buyer. The trees in the picture are primarily Douglas fir with a few redwoods scattered around the acreage. These are big trees, especially compared to the immediate neighbor who has clearly logged more recently. This is the start of a great private park, but the trees are masking some amazing sights.

What I couldn't show today.

What the first picture doesn't show is the other side of the trees. This pretty six acre parcel is on the west side of Dry Creek Valley, one of the finest grape growing regions in Northern California's wine country. By taking out a few trees, the view is going to be vineyards in the foreground and middle ground with various mountains and hills in the background.

There may be better views on some properties, but this ranks pretty high on my "sit on the porch and stare all day." view-o-meter.

The dilemma for me or other agents in this situation is that the proper mix of show-and-tell and imagination are rarely present in buyers. If you leave issues like the view to the imagination, most people will fail to understand what they can't see. It's normal. On the other hand, the proper way to choose which trees to remove or prune really depends on where the new buyer would build a house and how they would locate their windows and decks. So, we're stuck in the middle between buyers who can't visualize the view and owners who are reluctant to choose views on behalf of clients they can't visualize either.

I'm pretty certain we can eventually persuade the seller to find the happy medium and remove a few trees and some low-hanging branches. Today, however, I showed a beautiful view...that the clients can't see.

Healdsburg Sotheby's International Realty has great listings in Dry Creek Valley.

We're all seeing the return of a sellers' market for entry level homes. I've posted about it earlier and many of you commented that your areas are also affected. The saddest situations I see are for the first time home buyers struggling to finance a low priced home who are repeatedly losing out to cash investors. It's easy to say it's the market in action. It's harder when you are working with young couples with children trying to get started as home owners and get their kids enrolled in a good school.

I analysed recent sales data to try to show what has happened in Sonoma County. I listed just single family residences that sold since July 1, 2009 for less than $250,000, a level that is definitely entry level in this coastal California area. These are the homes for service workers, recent graduates, young couples, etc. Earlier this year there were hundred of these properties available and most people with good credit could qualify to buy...and the homes sold quickly. The newer data tells a different story.

The chart includes a data point for each sale. The far left side of the chart includes lingering listings from late in 2008 and early in 2009. Intuitively, you will guess that these long time on the market homes are not going to sell for a premium. That's borne out by the fact that the data points are all near or beneath the zero line on the chart. As you read to the right, there are data points above and below zero reflecting overbids above the line and underbids beneath it. There's a strong mix of sales prices. The middle of the chart are primarily short sales that went into contract between February and May and they reflect a slight trend towards overbids, but still a good deal of balance.

The right side of the chart tells today's story. The large majority of sale data points are now above the line. I have made a greenish color bar from the zero line to the $8,000 range that reflects the first time home buyer's tax credit. Most of the data points are at or above that green bar. The positive effects of the tax credit are being eaten away by the higher demand for housing that has created the overbid situation. Every data point in the upper orange area has effectively had their tax credit consumed by the higher price they had to pay for the house.

The blue area under the zero line contains the data points for peope who were able to purchase their Sonoma County home for less than the listing price. These buyers are the ones who benefit the most form the first time homebuyer's credit. For everyone else, the tax credit may have had the unintended consequence of spurring the market to rise higher and faster than it would have otherwise. I think we can all be glad for a return of a real housing market that supports regular homeowners being able to sell their homes. On the other hand, I think I'm going to miss the days when I could find affordable homes for everyone with a job, decent credit, and a pulse.

The big surge in foreclosed homes we have been told is coming has been a big yawn so far in Sonoma County. Buyers are aggressively bidding for decently priced homes on the market and sales are brisk. As an example of the drying up of REO inventory, there are less than 100 bank owned single family homes for sale in Sonoma County. That's down from 160 in April and 300 or more in January. That translates to a couple dozen foreclosed homes for sale in Rohnert Park or Windsor. When your home buying universe shrinks to that few to choose from, you can get frustrated easily. The reports of a surge of new foreclosure default filings in Sonoma County is welcome news to buyers (if not delinquent owners), but the homes in question are a long way from hitting the market.

The reality is that if you're looking for a great value REO home you are going to be fighting other smart buyers, both investors and first time buyers, who are looking for the same thing. On the street that means that the first days a new REO listing has been posted is going to be a scramble as real estate agents stack up with their buyers to get a look and figure out not just if they want to make a bid, but how much of an overbid they may have to make. It's clear there is a lot of pent up demand for affordable housing.

I'm curious about other parts of the country. Are you seeing a new wave of foreclosures? Are you still dealing with multiple offers and overbids?

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